Three essays in Corporate Finance

Abstract

This thesis consists of three chapters. The first chapter is titled "The Glass Cliff: Are Promotions to CEOs Precarious for Women?" This study investigates the "glass cliff" phenomenon, wherein female CEOs are disproportionately appointed to precarious leadership positions. Our analysis demonstrates that female CEOs are approximately 19\% more likely than their male counterparts to be appointed under such challenging conditions. We empirically test two competing hypotheses for the glass cliff: discrimination and preference. We find that the sensitivity of female CEO appointments to firm performance varies with product market competitiveness; it diminishes when industry competition intensifies. Contrary to the preference hypothesis, which suggests that firms may appoint female CEOs for performance recovery, our finding does not support superior post-appointment performance for firms led by women compared to those led by men. Our further analysis shows that while the presence of female directors on the board is associated with an increased likelihood of female CEO appointments, it does not mitigate the glass cliff effect, suggesting that boardroom gender diversity alone is insufficient to address deeper issues related to gender bias in leadership appointments. Overall, our findings imply that the glass cliff is primarily a consequence of gender discrimination rather than a strategic preference for female leadership during precarious situations. The second chapter is titled "Corporate Governance and Performance of Australia Family Firms". While the performance of family firms has been extensively studied in international markets, there is limited understanding of their corporate governance structures and impact on firm performance within the Australian context. In this study, we analyse a large sample of Australian firms to assess the performance of family firms from a corporate governance perspective. We first compare key governance mechanisms between family and non-family firms, including board independence, board size, managerial power concentration, and overall governance quality. Our findings reveal a significant substitutive relationship between family control and conventional governance mechanisms, indicating that family firms often rely on internal governance practices rather than external oversight. When examining performance, we find that family firms exhibit higher profitability; however, this advantage diminishes for market-based valuation once governance heterogeneity is considered. Our results remain robust across various tests, including propensity score matching (PSM) and instrumental variable (IV) analyses. The third chapter is titled "Bank CEOs' Financial Distress Experience and Risk Inertia in Risk-Taking". This study investigates the relation between banks' risk-taking behaviour and bank CEOs' experience in financial distress under regular market conditions. We document strong evidence showing the relationship to be positive: banks of high-risk levels are associated with CEOs with distress experience. This finding is in contrast to previous studies that report a negative influence of CEOs' experiences in crises or early career disasters. Our results remain robust through propensity score matching (PSM) and are further validated with placebo tests. To understand the mechanisms behind the positive relationship, we compare risk levels before and after the appointment of distress-experienced CEOs. Our results show that bank risk-taking does not significantly change following the appointment, suggesting that these CEOs do not actively escalate risk. Instead, the evidence suggests a role of matching in top-management appointments, whereby risk-prone banks strategically choose CEOs with distress experience to align with their existing risk culture. Show more